Basics

04/21/2009

Accelerating a contracting process usually benefits the side that is more prepared.

At least in terms of getting the best of the deal.

Think it through, if we know what we want, understand the risks, and are able to balance them against offsetting rewards or mitigation factors - what sense is there in delay?

On the other hand, when we don't know what we want (or, worse, a committee is trying to figure that out), don't know the risks, and need to think all of the offsets and mitigating factors through each time - delay is our friend.

The sad thing about this is that it is really the same terms being negotiated each time. The IACCM's top 10 most negotiated terms list remains about the same every year. As that is the case, your company has seen the most frequent challenges to your indemnification provision. You've heard all of the variables about Payment, and there are only so many business variables that surround most of your sales-side deals...

Face it, there really are only so many ways to intelligently re-draft the ownership of IP resulting from a services deal.

So why does increasing deal complexity bedevil most contracts organizations?

Poor documentation - we don't know what the primary and all allowable fallbacks are because there is no really easy way to look them up.

Poor metrics - how often does fallback #7 work? If you don't know, you aren't managing your terms, they are managing you.

Poor communication - with the average tenure in the profession over 8 years, many contracts people see no need to talk to their peers. This can be disastrous in widely scattered companies where hallway conversations between contracts & sourcing staff are extremely rare.

Pressure to accelerate in the absence of the above...

The last one is most damning. We've all fallen prey to the TAT metric inside contracts groups. "If we turn it faster, they will love us." This can be a fool's errand unless the tools (and more importantly the desire) exists to understand each deal individually, as well as how they fit into the portfolio of all deals.

Accelerating once you have 80%+ of the variables understood is easy. Until then, you aren't accelerating, you are cutting corners and calling it efficiency.

04/02/2009

A 40-year contract negotiator taught me that the only difference between negotiation and bargaining was the dollar value of the deal.

We feel the need to 'negotiate' when the deal is highly visible, and when various parties around the deal (consultants, approvers, reviewers, sub-contractors) force a complex web of decision onto the deal. As a result, extensive coordination is necessary, because in the modern business climate, nobody is empowered to make a decision alone.

Bargaining is much less restrictive. You negotiate by arguing for days over the wording of a clause, you bargain when it is time to sign the deal, and a few last things haven't been decided.

It's bargaining when we say, "Look, if you give me X that I want, I will give you Y that you want."

It is negotiation when we say "The Industry Best Practice around that is to do X, you know, the thing that I want." By the way, this happens so often that I spent a fun twenty minutes on Wikipedia rooting through all of their very cool posts on logic to find Argumentum ad populum which is really what we are up to when we use the 'industry best practice' approach.

Now, there is a place for negotiation and bargaining. But where many people in the profession go wrong is by using one or the other, exclusively.

Think about bargaining without negotiation - doing deals with no review, controls or assurance that either party can actually deliver.

Negotiation without bargaining leads to deals that get bogged down for months in trench warfare between competing groups of experts.

The 40-year negotiator who mentored me was a master of knowing when to negotiate, and when to bargain. For the last few years, I've worked with outsourced, lawyer-dominated contracts functions, and our people were master negotiators, but struggled with bargaining.

I think the key is that to bargain, you must be in the position to make (or completely influence) the final call. You can do X for Y trades if you really control Y, and really have visibility to X. Outsourced (or even captive offshored) staff can be good at negotiation, but I question whether they should have the authority to Bargain. Bargaining is something that is best done by in-house staff, after all of the negotiation and administration has been completed.

In my consulting practice, I often find outsourced (or automated) processes that eliminated bargaining. The result of those processes just doesn't feel right to our clients. By re-mapping the process to re-introduce the ability to bargain, we achieve the desired look & feel, without losing the benefits of centralized delivery.